how washington's tax deal affects you, the small business owner. why minimum waging your inventory is crucial to keeping your company alive, and how to get customers to buy after the holidays. it's time to make money coming up next on "your business." small businesses are revitalizing the economy, and american express open is here to help. that's why we are proud to present "your business" on msnbc.

hi there, everyone. i'm j.j. ramberg, and welcome to "your business," the show dedicated to giving you tips and advice to help your small business grow. for small businesses, the uncertainty of last year has carried over into 2013. the good news. the national federation of independent business optimism index was up slightly in december. the bad news. the index is still at recession levels. the index for this month is expected to be impacted by the fiscal cliff tax deal passed by congress. that deal negotiated between vice president joe biden and senate republicans ends the payroll tax holiday, raises taxes on those making over $400,000 a year and increases capital gains tax rates. so, how will this impact your small business? barbara wealthman is an attorney and a leading authority on tax law and finance for small businesses. she is the writer of the muntari

e newsletter "big ideas for small business" and also author of the book "j.j. lasser's "1,001 tax deductions and great to see both of you. thanks for joining us. >> a pleasure. >> i read some article that said recently frustrated, elated, happy, confused, those are people's reactions right now to just what happened in washington. barb, i want to talk with you first and foremost about the payroll tax holiday so there's no uncertainty about that. your employees are going to be paying more out of their payroll. for their payroll tax is this something you've discussed with your employes? >> we haven't discussed with them yet. i think we were waiting first to see what was going to happen. our plan is to discuss with them right before they receive their

first paychecks that there is going to be a change, that there is a 2% additional tax that is coming out of their pay and we're going to, you know, try to work with them if there's going to be any type of problems. >> yeah. this is a question that i just had myself is do you talk about this, barbara, or do you just assume that everybody knows because chances are people are going to get their first paycheck and think why am i getting less money? >> i think if they haven't been paying attention to what's happening in the news they may be surprised, but they may well be aware of that change. what they have to know is they don't have to do anything. there's nothing required of employees because of the new law. however, some employees may want to file new w-4s with their employers to change their withholding. >> right. >> that's something you can bring up with them. >> you can bring it up with them. >> so some issues have been resolved and many issues are still unresolved. we still have this enormous debt, and how worried are you,

barbara, for small businesses going forward that taxes may go up, taxes we haven't even discussed right now, that their expenses may go up sometime in 2013. >> well, anything is possible and all possibilities really are on the table. clearly they could come back and attack various tax breaks or so-called loopholes that are there, but we really don't know. it's likely that nothing will be changed for 2013 and that any changes will take effect the following year, so at least we do have some luxury to plan for this year and budget for this year. >> and that's the thing. small businesses actually would say got off easy in this deal, some of the expensing, depreciation, the bonus depreciation, the r & d credit that viewers may be using, those all stay but only through 2013. barb, how do you feel right now? one of the issues you were worried about before the deal

was made in washington was that taxes would go up for people making under $400,000, so now that's taken care of for now. what are you worried about, if anything? >> well, i think that the first thing is the tax extenders, making sure that at some point they become permanent. we were in a situation where we were very lucky that there was some bipartisan, and we moved from being 200,000 to a 400,000 cap. that helps many small business owners. some will still be affected by it, and, you know, one of the things that is important is having those tax extenders become permanent because then we can plan for the future. >> and are you worried about some surprising tax break that you're getting right now disappearing? >> well, i think that the r & d aspect, also with section 179, you know, there are certain things that, yes, we look at and

make decisions to spend money and put it back into the economy, and if those tax extenders were to go away, we would have to withhold on making purchases that would be put back into the economy. >> and just to be clear, section 179 means you can expense stuff in one year. >> correct. >> you can write off the entire cost of a purchase instead of having to depreciate that cost over a number of years. >> barbara, as small business owners what should we be doing to plan for that uncertainty? anything we can do, keep cash in the bank, what? >> the good news is for at least 2013 we know what the rules are and certainly take full advantage of them so clearly as you're getting towards the end of the year, if you're considering making equipment purchases, take advantage of the rules that exist now rather than gambling on what they are going to be in 2014. >> barb, barbara, thank you so much. it's certainly been a difficult time to figure all of this out and we appreciate you coming on and recapping what we can expect

for the next year. how much do you need and what when do you need it? those two questions are constantly on the mind of small business owners who are selling their products. of course, getting customers to buy just part of the process. once the orders come in, you have to make sure you've got the inventory you need to fill them. >> the seed bomb industry went from a kitchen table enterprise to a much bigger operation. it really exploded. >> we always try to project where people's minds will be at any given point in time and be ready for that. >> we try our best not to fly by the seat of our pants. >> the owners of visual lingual in cincinnati, ohio, didn't invent seed bombs, but they package them and turned the concept into a thriving business. >> a seed bomb is a mixture of seeds, organic fertilizer and a powdered play. you can throw the seed bombs in

the ground, and they will break up on impact. >> what started off as requests from smaller retailers in 2009 has turned into sales at places like restoration hardware and anthropology and plenty of custom orders. >> it just kind of overnight happened like that where we jumped into high gear and started making these massed quantities of it. >> with so much growth the pair knew they needed to change the way they handled orders for their seed bomb pouches and kits. the old way just wouldn't cut it anymore. >> we would buy the materials in five-pound increments and make that much and then they would be sending that out pretty much directly. >> as a result, they came up with a plan for managing their inventory. >> it was a matter of figuring out how do we scale this up? how do we kind of keep a grasp on all this stuff and stay organized and doing the math and figuring we need -- we need 100 times the amount of materials that we use for the last orders. >> ever since then it's been a well coreographed act to have inventory and raw material at the ready. >> we're going to make a screen

so we can print the pouches and we'll print the screen. same thing with the seed bombs, it's a matter of having the parts that go into the whole on hand or accessible to us. i think it's the biggest thing. >> the goal is to be able to accommodate any and all orders that could come in at any time. >> i think it's the small business model of the kind of just in time and we respond to orders if they come and we make a little bit of extra so it's there and then it's gone and we go through that cycle again. >> we always hope that those reserves are not too much more than is needed because we do prefer to turn inventory around, you know, fairly quickly. >> the amount of seed bombs ready to go is based on the popularity of the product. >> we're always trying to keep about 150 to 300 units of some of our kind of repeat selling products. 300 is two or three batches and 150 is one or two batches. it's just a feeling of, of course, that's a good amount to have. >> we first started, we were definitely making less than that. >> knowing their customers and

knowing when they may place their orders are part of the calculated risks they take. >> the big wholesale orders that we get have enough lead time that we can really kind of plan out. >> smaller retailers want their stuff quickly because they don't have to plan ahead and they don't have storage, so they order as needed, and they expect it when they need it. >> larger orders definitely require a bit more attention. >> we all need to stay on a schedule. we have a finite amount of space, a finite amount of strength, and everything is done by hand. >> but it's often those sales that produce the inventory that maya and michael need to respond to smaller orders simultaneously. >> we can hang on to produced seed bombs and then screen print the pouches and put the product together very quickly so that's a part of the labor that really doesn't have to happen until it's needed. >> having extra seed bombs is crucial because ideally production takes a few days. >> we let our seed bombs air dry

for a minimum of two days, ideally three days would be how long we want to wait or we need to wait before we will package the product. >> finding multiple suppliers who are willing to act fast helps with the work flow. maya and michael like having options, too. >> if we do need something overnight we can get it overnight and respond to that as quickly as possible. >> the pair has found a unique balance between the number of supplies they need and the number of products they can make. >> there's kind of a consistent recipe we're using with consistent ingredients, but we might add something a little special here and special there just to make something different whether it's herb seeds or wild flower seeds, changing one of the variables in there gets us to the different product. >> the overlap allows for some flexibility and production of the nearly two dozen items being sold. >> that product line can be expanded and contracted based on what the trends are, what the season is or what the holiday is. >> of course, the plan doesn't mean there isn't waste. >> you never want it to happen, it does happen. >> managing inventory isn't a

perfect science, especially when your product is perishable. >> we never want to sit on inventory for too long so we don't produce infinite inventory even though we could because it has a finite shelf life. >> if you make things and they haven't sold in time and you get a big order, rather than ship that out and have a customer who is disappointed then you know, okay, it's the right business decision to get rid of this product. >> michael says the best advice they can offer other entrepreneurs is to not overthink anything. he believes that a little strategy and occasionally maybe even some luck will allow you to manage your inventory the best you can. >> i think it's really about minimizing the number of variables and parts that are at play. if you can do that and get to a point where there's fewer pieces that you really have to think about and guess about and figure out, then the better equipped you are to respond to whatever comes up. >> inventory can be a big

headache, but i cannot tell you how many small businesses have failed because they have either overestimated or underestimated their inventory needs. so now let's turn to two entrepreneurs who know the importance of managing inventory. divia is the co-owner of send the trend, a website dedicated to fashion accessories and beauty and jen is a serial entrepreneur better known for creating butler bags. good to see you both. >> great to be here. >> both of whom have a lot of experience with inventory. both of you, i'll start with you, jen. how do you figure it out. when you're bigger, you get it. you have these repeat customers and sort of have a formulas but when you're starting out and you're small, how do you figure it out so that all of your capital is not tied up in inventory and yet you can fulfill the needs? >> it's actually a really delicate balance, and it's an understanding of how will you have your distribution, in this example anthropology concerns or a big pr push so there's traffic

to your website which could up set the balance. it's a really hard formula to anyone to truly get. the understanding is really to have your finger on the pulse constantly. i suggest for a lot of small businesses, when they have an overflow like they were talking about here, to reach out to the daily deal sites, and this is a newer strategy for small business owners to really get rid of their inventory while building their brand and database, and we've used them a lot. for example, people with perishables, do it with company with short leads, for somebody who doesn't have a perishable work with companies with a long lead and every quarter it's a way to empty out your inventory while you're building your brand. business owners will say i'll sell it for 50%, 60% and the reality that's what you'll sell it to retailers anyway so this allows the traffic to your website and get new customers

you can get. >> what do you do? >> in the early days and you're a small business own as little inventory as possible. you should focus on building your brand, marketing, getting customers, at the same time optimizing inventory, so if you can play the small business card and reach out to manufacturers, your supply base and vendors and get them to work with you, help them help you finance your inventory, whether it's through payment terms, whether through extended credits, it could be any variety of ways, and for us primarily it's on the trend when we first start out is consigning inventory. we don't have money to buy this, but let us put it up on the website, you put it to your facility. when we sell, it right away we'll be ready to take it away. >> is that easy to find someone who will do that? >> depends on the industry and the market. for us we found lots of willing players who believed in our vision. you're an entrepreneur, sell your vision to somebody, get them to believe in your business

and you leverage that. say, hey, listen, we're this tiny company and months from then we're ordering tens of thousands of units. the reality is let them grow with you, and if they see the upside of the promise of that they will want to take the ride. >> a perfect panel to talk about this. thanks, guys. billing clients and tracking hours and expenses can be incredibly easy and streamlined or incredibly disorganized and a time sink. so here now are five ways to master the art of invoicing, courtesy of startupnation.com. one, use a contract. set expectations from day one. this can help avoid any misunderstanding down the road. two, invoice early and often. the sooner you get the invoice to your clients, the sooner they will pay it. number three, itemize your invoices. be as clear and specific as possible so there's no confusion over what they are being billed for. if a client doesn't understand the charges, they are less likely to sign off on the

invoice promptly. four, know who pays you. find out who actually signs the checks and processes the payments. this information will come in handy if you need to address any outstanding invoices in the future. and number five, follow up on outstanding payments. send a reminder to your client on the due date and then once per week until the payment is received. when we come back, we'll have some suggestions on how minority business owners can receive certification, plus some ideas for getting customers back into your stores after the holiday shopping are you. we've all had those moments. when you lost the thing you can't believe you lost. when what you just bought, just broke. or when you have a little trouble

a long way from home... as an american express cardmember you can expect some help. but what you might not expect, is you can get all this with a prepaid card. spends like cash. feels like membership.

last week we profiled a company using gameification to increase their users and learning our own lessons from the piece we tried to incorporate gameification ourselves here at "your business" so we asked you to submit your entry in our messiest desk contest on our facebook page. the winner is joyce finnegan of rome, new york, who sent us this picture of her very messy work space saying all i need is a hammer and chisel. she will get to add to that mess by winning a copy of our bok "it's your business" and our coveted "your business" coffee mug. congratulations. now, this week we want to see who out there has the best business logo. want to play? just go to the msnbc "your business" facebook page, click on the contest tab and enter by posting a picture of your small business' logo. our viewers and "your business" staff will decide which one is the best. the winner will get a bunch of "your business" goodies and a phone call from me where we'll

talk about your company and try to tackle any challenges you're facing. the shopmovement got a lot of attention around the holidays packing on small business saturday. this year we're introducing a new segment aimed at maintaining that excitement all year around. and in today's "shopping small" we have several tips. tom is the host of "open for business" a business and consumer talk show. you can find him online at small town marketing.com or right here with us. hey, tom, great to see you. >> great to see you j.j. thanks for having me. >> tom, you gave me one of my favorite tips in the book that we just released about getting people to come to your store instead of a bik big box store down the street and you said, underprice them and people's reaction is how can i underprice walmart, for instance, what do you do? >> your mom and pop stores can't

compete with walmart and kmart and costcos of the world so you can't compete with them dollar-for-dollar so the best thing to do is to compete with them for a short period of time, like an afternoon or a you know, for a few hours. so a couple of quick things about sales, though. they can be dangerous in small towns in small communities and small markets. one thing about sales if you have a 30% margin and you're selling an item for 20% often, you have to sell twice as many of those items to make the same money so if you normally sell ten items to make $100 you'll have to sell 20 to make $100. >> maybe you use it as a leader to get the people in the door and you wow them with all your other services. i want to move on to the next one. hold an annual grand opening. would that the be weird in the second year to hold a grand open something. >> well, when you drive down main street all the businesses

tend to look alike. and when i first moved to bozeman, i found out our population turns over every seven years. people die, move, get married, born, whatever, new customers are always coming and going and your worst day of business, normally, is your first day of business so what do you do on your first day of business? have a grand opening so why not reach those new people and this particularly works well if there's an event in town, county fair, something like that, that will draw these people? >> got it, okay. provide buddy coupons for shopping. so this is where i get $10 for myself and if i bring a friend in, is that how it works? >> a shop with pay buddy coupon is sort of a spinoff of the restaurants have used this for years. buy one entree', your second entree' is free or half price or whatever. so what i did was just expanded

this to the retail areas and i use it as a bag stuffer. where customer comes in and buys something and they take this with them so the next time they come in, they not only come in but hopefully, bring a new customer with them, too. >> you talk about employees. you have an amazing marketing resource right there in your own business if you know how to utilize them. >> now they're on twitter, facebook, employees are very, very important in building your business. the average number of people that attend weddings and funerals, 250. that's how many people you're employees know. and -- >> you should give them -- >> you need an incentive for those employees to bring people in, give them every employee should have business cards and should have incentive to pass those out. >> and finally your last tip, beat the competition by packaging. what kind of packaging. >> can if you advertise a single item it's easy to go online and

get the price. if you package things together it makes it tougher. mcdonald's and all the fast-food chains do this with value meals. they package the sandwich with the fries and drink and whatever and you can do the same thing. a digital camera with a case and an extra video card and you know, some other extras or things like that. we're selling value not just the item and also trying to increase add-on sales. >> because one again, you're not going to beat the big box store on price. tom, thanks for coming on and sharing your tips against small town marketing.com is where we can find more of these. have a great day! as we saw earlier with products flying in and out of your business, tracking all the moving parts can be overwhelming. so if you're looking for a way to help take control of your inventory check county our app of the week. goods order inventory is designed to help manage orders,

stock and sales right from your mobile device. you can use it for free. time to answer some of your business questions. the first one is about getting more customers. >> how can we better utilize our referral network of past clients that have been successful with the work we've done? whether it's through social media or telephone? >> so, how do you get your customer, your happy customers to be your marketers. >> the best thing to do is get testimonials. allow them to tell you what the experience was. people trust other people. put those testimonials on your website. get photos and success stories. get case studies. whatever you possibly can, depending on your industry, here's it's dating. lots of success stories, marriages made, photos, and really put them prominently on all your marking channels so on the web, on your social media trans, facebook, twitter, create contests. this is a success story of the

week. the fan of the week. and really, let them get you new people. >> so that gets people. now you've built up your own site so you have your own marketing. how do you get them to tell their own friends? >> to that opponent, testimonials always the most prominent and credible way. having video, too. so if you're uploading video on facebook or twitter or your website, video allows somebody to hear the story in 30 seconds or having the photos or video adds the credibility so someone can see you face versus text across the screen but also, having a conversation. room out to your the u.customer a conversation on twitter or facebook and talk about your experience so your friends can see what they're saying. that's another really credible way to get people engaged in a conversation and get to watch what's really the story behind it. >> that's an interesting idea. so suggest a tweet-up. >> and then automatically -- >> or even a loyalty program for existing customers. a dating site, they found a

match and next time you come on we'll give you a reduced rate and the third time it's another reduced rate so they keep coming back and keep using the service you're getting increased sales and put a referral program so if they tell their friends, incentivize their friends. we do a give-and-get program. you can give somebody you're inviting to the site $10 so you give them a gift and you give them $10 toward the site. >> getting an entrepreneur certified. >> how do we get certain occasions for minority bids owners. the certification can sometimes take up to six months. how do we that process forward more on a speedy time? >> so i can say that it is a long process. and it takes what it takes and you got to make sure you dot all your "i's" and cross all your t's. into is there any way around it? >> simple answer, get involved

in politics. local politics in your area. know who the policy makers are and who is advocating for things like this and in you're community, getting people on council who are understanding that, hey, if you pay attention to me we'll build the economy in our community and that makes it something that makes them look good so that they're going to push it through more quickly competing with others. >> something makes me think also, this may be taking you six months but once you have the certification you need to know who to go to and who is more apt to hire you. >> i have a totally different approach. go to people who actually have the certification. find out the tips and tricks from them. people who have been through the process are the best mentors to get you through the process as quickly as possible. >> okay. guys thanks so much for all the advice. >> thank you. >> to learn more about today's show just click on our website at open forum.com/your business. you'll find all of today's exclusive and content